Case Study 3 Acct 504 Week 6

The Entire Case Study is due Sunday at Midnight Mountain time at the end of Week 3. This Case Study is worth 100 points or 10% of your final course grade. This Case Study relates to TCO's D and E and Chapters 3 and 4. MAKE SURE TO COMPLETE ALL REQUIREMENTS WHICH ARE LISTED BELOW. There are 10 Sheets in the Workbook including this one. All of the Information you need for the Project is located in this Workbook. Requirements Requirement 1 - Prepare the Journal Entries in the General Journal Requirement 2 - Post Journal Entries to the General Ledger Requirement 3 - Prepare a Trial Balance Requirement 4 - Prepare the Adjusting Entries Requirement 5 - Post Adjusting Entries to the General Ledger Requirement 6 - Prepare an Adjusted Trial Balance Requirement 7 - Prepare the Financial Statements Requirement 8 - Prepare the Closing Entries Requirement 9 - Post Closing Entries to the General Ledger Requirement 10 - Prepare the Post Closing Trial Balance

Hint for success: review the Week 2 Lecture prior to starting this project. There are also hints contained within certain cells on some of the worksheet tabs. You can hover over the red pointer at the top right-hand corner of the cell to read the hint. Hints are provided for the following balances: 1) The debits for the journal entries on the Journal Entries tab 2) The credits for the journal entries on the Journal Entries tab 3) The cash balance on the General Ledger tab 4) The debits for the trial balance on the Trial Balance tab 5) The credits for the trial balance on the Trial Balance tab 6) The debits for the adjusted trial balance on the Adjusted Trial Balance tab 7) The credits for the adjusted trial balance on the Adjusted Trial Balance tab

1. (TCO A) Which one of the following is an advantage of corporations relative to partnerships and sole proprietorships? (Points : 5)

Reduced legal liability for investors Harder to transfer ownership Lower taxes Most common form of organization

the most common form of distribution is a cash dividend the Dividends account will be increased with a credit the Retained Earnings account will be directly increased with a debit the Dividends account will be decreased with a debit

4. (TCOs B, E) A small and private company may be able to justify using a cash basis of accounting if it has _____. (Points : 5)

sales under $1,000,000 no accountants on staff insignificant receivables and payables all sales and purchases on account

5. (TCO D) Three companies report the same cost of goods available for sale, but each employs a different inventory costing method. If the price of goods has increased during the period, then the company using _____. (Points : 5)

LIFO will have the highest ending inventory FIFO will have the highest cost of goods sold All three companies will have the same value for ending inventory. average cost will have an ending inventory value that falls between FIFO and LIFO

6. (TCOs A, E) Equipment was purchased for $60,000. Freight charges amounted to $2,800 and there was a cost of $8,000 for building a foundation and installing the equipment. It is estimated that the equipment will have a $12,000 salvage value at the end of its 5-year useful life. Depreciation expense each year using the straight-line method will be _____. (Points : 5)

debit to Cash of $2,000,000 debit to Premium on Bonds Payable for $60,000 credit to Bonds Payable for $2,000,000 credit to Cash for $2,060,000

8. (TCO C) Accounts receivable arising from sales to customers amounted to $35,000 and $40,000 at the beginning and end of the year, respectively. Income reported on the income statement for the year was $120,000. Exclusive of the effect of other adjustments, the cash flows from operating activities to be reported on the statement of cash flows is _____. (Points : 5)

$120,000 $125,000 $155,000 $115,000

9. (TCO F) One variation of the horizontal analysis is known as _____. (Points : 5)

14. (TCO G) To calculate the market value of a bond, we need to _____. (Points : 5)

find out the present value of all of the future cash payments promised by the bond calculate the present value of the principal only calculate the present value of the interest only multiply the bond price by the interest rate

1. (TCO A) An advantage of the corporate form of business is that _____. (Points : 5)

it has limited life its owner's personal resources are at stake its ownership is easily transferable via the sale of shares of stock it is simple to establish

the most common form of distribution is a cash dividend the Dividends account will be increased with a credit the Retained Earnings account will be directly increased with a debit the Dividends account will be decreased with a debit

4. (TCOs B, E) A small and private company may be able to justify using a cash basis of accounting if it has _____. (Points : 5)

sales under $1,000,000 no accountants on staff insignificant receivables and payables all sales and purchases on account

5. (TCO D) In a period of increasing prices, which inventory cost flow assumption will result in the lowest amount of income tax expense? (Points : 5)

FIFO LIFO The average cost method Income tax expense for the period will be the same under all assumptions.

6. (TCOs A, E) Equipment was purchased for $60,000. Freight charges amounted to $2,800 and there was a cost of $8,000 for building a foundation and installing the equipment. It is estimated that the equipment will have a $12,000 salvage value at the end of its 5-year useful life. Depreciation expense each year using the straight-line method will be _____. (Points : 5)

debit to Cash of $500,000 credit to Discount on Bonds Payable for $20,000 credit to Bonds Payable for $480,000 debit to Cash for $480,000

8. (TCO C) Accounts receivable arising from sales to customers amounted to $35,000 and $40,000 at the beginning and end of the year, respectively. Income reported on the income statement for the year was $120,000. Exclusive of the effect of other adjustments, the cash flows from operating activities to be reported on the statement of cash flows is _____. (Points : 5)

$120,000 $125,000 $155,000 $115,000

9. (TCO F) Which one of the following is not a tool in financial statement analysis? (Points : 5)

14. (TCO G) To calculate the market value of a bond, we need to _____. (Points : 5)

find out the present value of all of the future cash payments promised by the bond calculate the present value of the principal only calculate the present value of the interest only multiply the bond price by the interest rate

Required: 1. Using the information provided prepare a Balance Sheet. Separate the current assets from non-current assets and provide a total for each. Also separate the current liabilities from the non-current liabilities and provide a total for each. 2. Using the Balance Sheet from your answer above calculate; Current Ratio, Days in Inventory, Average Collection Period, Return on Assets Ratio, Debt to Total Assets and Return on common stockholders’ equity ratio. (Make sure to show all your work)

2. (TCO B) The following selected data was retrieved from the Wal-Mart, Inc. financial statements for the year ending January 31, 2013: ........................................................................................................................................................................................................................

Required:

Using the information provided above: 1. Prepare a multiple-step income statement 2. Calculate the Profit Margin, and Gross profit rate for the company. Be sure to provide the formula you are using, show your calculations, and discuss your findings/results.

1) Please calculate the percentage increase or decrease in cash for the operating, investing, and financing sections and explain the major reasons for the increase or decrease for each of these sections.

2) Please calculate the free cash flow for 2012 and explain the meaning of this ratio.

4. (TCO D) You are CFO of Goforit, Inc., a wholesale distribution company specializing in emerging technologies. Your CEO is a brilliant marketer, but relies on you to explain issues and choices in accounting and finance. She has heard from other members of a CEO organization to which she belongs that a company’s net income can vary widely depending on which accounting choices are made from the “GAAP menu.”

Assuming the goal is to maximize net income, choose an accounting treatment from each of the following scenarios, and explain to your CEO why the choice will produce the desired effect on reported Net Income for the current year. Include in your answer the effect of the choice on both the income statement and balance sheet.

Required:

a. Goforit carries significant electronics inventory in a competitive environment where prices are actually falling. Which inventory valuation method would you choose—LIFO, FIFO, or average cost? Assume that unit purchases exceed unit sales.

b. Goforit has a large investment in warehouse equipment including conveyor belts, forklifts, and automated packaging systems. Which depreciation method would you choose: Straight line (SL) or double declining balance (DDB)?

5. (TCO F) Please review the following real-world ratios for Johnson & Johnson and Pfizer for the year ended 2012 and address the 2 questions below.